INFA Rolling but No Rest for the Information Driven

Informatica (INFA) is on a roll.  Just a glance at INFA’s Q3-FY13 financial results, with total revenues increased by 24% year over year, in market where no similarly established enterprise software vendors grew in double digits during the same period, confirms that INFA has left the more meager days of a year ago far behind.

Specifically, for Q3-FY13 total revenues reached $235.4m versus $190.3m year-over-year.  Increased operating expenses, however, nearly matched the revenue gain, totaling $162.6m versus $128.4m.  Though some Wall Streeters bemoaned the nominal gain in operating profits of slightly more than $2m, still the outstanding revenue growth pushed investor sentiment and the stock price higher.  INFA’s share price has since lost those gains due to weakness from other tech related results, most notably from QlikTech.

Stock swings aside, INFA has been rightfully recognized as one of the top comeback kids in enterprise software.  Bloomberg, for example, recently placed Informatica CEO Sohaib Abbasi in second place in the Tech’s Top Turnaround Artists.  Mr. Abbasi has unmistakably grasped that while INFA currently sits in a sweet spot, tech will continue to evolve rapidly in this current environment of change and innovation.  INFA, therefore, must continue executing in terms of innovating its portfolio and go-to-market to remain ahead of the considerable competition.  Mr. Abbasi’s most telling words from the INFA Q3-FY13 earnings call, sending a message to investors hoping for tighter operating expenses, were, “Based on our firm conviction in our long-term growth opportunity, we are increasing our investments, both in strengthening our product portfolio and in pioneering new technologies to benefit from emerging megatrends such as cloud computing, big data and the Internet of Things.”

Mr. Abbasi underscored how those innovations are paying off for INFA and its customers, stating, “Among our newer products, cloud data integration, MDM [Master Data Management] and ILM [Information Lifecycle Management] continue to be the fastest growing,” and “…usage of our newer products by our customers has increased consistently from 4% in 2007 to 46% of the active projects in Q3 2013.”  When asked why older on-premise solutions were not as applicable today as they were a few years ago, Informatica’s CFO Earl Fry responded, “…the use cases are very different for our cloud integration and MDM technologies than the on-premise technologies.”  While accurate, Mr. Fry understates the situation.

Integration Enabling Information Driven Enterprises

Data integration, process integration, software development through API management, virtualization aka cloud, data governance and quality, and data protection are all necessarily converging as enterprises try to wrap their arms around all their information assets.  Why bother?  The most sophisticated companies want to apply their information assets with optimal agility and minimal risk, and shift deployment of those assets to the cloud to gain global scale.  The currently in vogue business use cases driving the convergence, like big data analytics, systems of engagement, and the second generation of SaaS solutions, however, are just the tip of the iceberg.

Some enterprises, like General Electric, with its notion of the Industrial Internet, aren’t waiting around to see what others might do.  There is something of an act of faith required; the notion of becoming, to use a currently hot tech buzzword, “data driven” may not return palpable ROI in this very quarter. Personally, I am not enamored with the “data driven” term.  Larry Ellison emphasized at Oracle OpenWorld 2013 that we are living in the “Information Age,” and he was spot on.  The trick is to become more information driven, and the first and subsequent steps down that path involve integration technologies.

In terms of becoming information driven, every business will start at a different place, and move at different speeds that will vary over time.  Therefore, Mr. Abassi and Informatica need to help customers build strategic to tactical bridges.  For example, Informatica’s Vibe appeals to IT architects as they chart the course of becoming information driven.   Tactically, however, Informatica further illustrated its commitment to data governance by announcing a partnership with e-Discovery specialist Exterro, where Informatica supplies the underlying archiving part of the solution, and exposes a number of APIs through Exterro to help customers modify their e-Discovery solution to fit their own needs.

Informatica even needs to excel in the middle ground between the strategic and tactical.  For example, the number of enterprise solution clouds are increasing, not just Salesforce Platform, but also Oracle Cloud and SAP HANA Cloud Platform.  Informatica’s clear commitment to Cloud integration, while several years old, will also need to evolve as these clouds solve basic data integration that was long ago solved in on-premise solutions, and shift integration attention to supporting end-to-end business processes in the cloud.

While the number of integration-oriented vendors and solutions has expanded, INFA remains in the catbird seat as the number one integration best-of-breeder on the planet.  The math is simple:  The more clouds, the more client devices, the more apps, the more servers virtual or otherwise, the more people, the more data, the more innovation there is towards becoming information driven the more need there will be to integrate.

As long as the number of connected intelligent computing objects and consumers of computing on Earth continue to grow at a rapid pace, the demand for solutions from the likes of Informatica will remain strong.  In this age of becoming information driven, however, there is no resting on laurels.  Great quarter Informatica, now go back out there and innovate, partner, and execute some more.  There is, alas, no rest for the information driven weary.

Source for quotes:  Seeking Alpha, transcript of Informatica’s Q3 2013 Earnings Call